Each week, Financial Post contributor Mary Teresa Bitti revisits CBC’s previous week’s episode of Dragons’ Den. She captures what the cameras didn’t and in the process provides a case study for readers, zeroing in on what pitchers and dragons were thinking and what the challenges for the deal are going forward.

The pitch On this week’s family episode, Montreal brothers Fabio (a lawyer), Joe ( in finance), Matteo (marketing) and Luciano (a chef) were hoping to make their mark in the snack food business with Bad Monkey Popcorn.

“We all had our careers and we were OK with them, but we weren’t super happy,” said Fabio, who co-owns the business with Joe. At their regular family dinner night, the brothers started talking about how they could put their skills together to start a company. “We were actually eating popcorn at the time. Joe said, ‘don’t you think we can make a better popcorn than this?’”

While researching their favourite childhood snack, they learned popcorn was worth hundreds of millions of dollars in the U.S. and was controlled by a few very large players, none of which only make popcorn. Going up against multi-billion dollars companies didn’t bother the brothers, nor were they worried about not having much capital. What they did have was a clear vision to build a company with the attitude of Red Bull, the price point of Walmart and the quality of Starbucks.

Christinne Muschi for National Post

“The magic trifecta,” noted Fabio, who is the chief operating officer. It was their mother who suggested the name, reminding them she used to call them little bad monkeys.

Bad Monkey Popcorn launched at Montreal’s Grand Prix. “What makes Bad Monkey Popcorn different is our attitude,” Fabio said. “That’s why we introduced the product at the Montreal Grand Prix. We convinced them to give us prime location. After that, everybody wanted us, Just for Laughs, Cirque du Soleil, we didn’t start in the grocery stores, we said, let’s focus on our brand, and be part of every cool event.”

Festivals and corporate events continue to help create buzz and awareness. A strong social media marketing campaign complements its very visible presence in the community. People started talking and the brothers leveraged that interest to get into grocery stores.

“We pitched it as not only are we selling you a product but also a service. We’re going to go on social media and tell our thousands of followers to go buy the product at your stores.”

The company moved into 10,800 square feet, from its original 375 sq. ft. facility, and now has 18 employees and shelf space in 217 grocery stores in Quebec. It also just landed a contract with Walmart in the U.S. for 150 stores, is on shelves in Germany and Britain, and will be available in Ontario in the next eight months.

“We wanted to make our mistakes at home in Quebec before going into Ontario, but the demand is there,” Fabio explained.

Customers are responding to the quality. The popcorn, which comes in 22 flavours, is made from round, fat mushroom kernels with no hard interior eliminating any extraneous bits getting stuck in your teeth. A 200 gram bag retails for $2.99.

At the time of the pitch, the company had sales of $340,000. This year, it is on pace to almost triple that. Gross margins sit at 50 per cent but the company hopes that will dramatically improve when volumes rises.

The deal Fabio and Joe asked for $150,000 in exchange for a 20 per cent equity stake, valuing the business at $750,000. The money was earmarked for automating the bagging process, which was being done by hand. But they were also looking for an adviser with experience in manufacturing and distribution.

Michael Wekerle made an offer, asking for a two per cent royalty instead of an equity stake; Joe Mimran was ready to give the entrepreneurs what they asked for; but it was Manjit Minhas’s offer of $300,000 for a 30 per cent stake that got their attention. “When she upped the money and the equity stake, we believed she would be more committed,” Fabio said.

Depending on who you speak to that deal is either dead or still on the table.

“The deal didn’t make it through due diligence,” Fabio said, explaining that after meeting with Manjit’s father in Montreal “there was no meeting of the minds.”

When she upped the money and the equity stake, we believed she would be more committed

Bad Monkey Popcorn has since taken on a Quebec-based investor and has than doubled the stores it sells in, with distribution in place in Europe and Mexico City. “He helped us tighten our ship, get profits up, negotiated our lease and financing with the banks,” Fabio said.

A dragon’s point of view Minhas said she is still considering the deal. As for her initial interest, she said she liked that it’s a family business. “That touched my heart …. They’ve done some fabulous things in an industry that is not unique but to get to the next level they need more money for marketing, branding and distribution. I knew I could help them with that.”

An expert opinion John Cho, partner at KPMG Enterprise, liked the complementary skill sets the brothers bring to the business and what they’ve achieved to date. “I do wonder about how they are positioning their product. Is it based on pricing or quality? If the demand continues to grow and they are able to create a buzz then they have the ability to increase their prices without impacting volume. If the strategy is to keep prices low, then they may be leaving money on the table,” he said.

He also wondered what happens if the business is a big success. Will the brothers who are employees be able to participate on the upside even though they aren’t assuming the same risk?